Tax credits, income tax and new job!

Thriftylady

I have applied for child tax credits for the first time, but since filling in the form I have secured a new job. It will involve a pay cut and I will be working fewer hours. I haven't got full salary details yet, and my claim for tax credits is still being processed, so I can't change it yet anyway, but will do so as soon as I know whats happening.

To complicate matters, I will be starting work on an emergency tax code as I probably won't be able to get a P45 from my current employer in time for starting my new job, so its possible I will start paying more tax than would normally be the case.

BUT to complicate it just a little bit more, my current employer made a mistake some years back which resulted in me underpaying my income tax, and I now owe money to Revenue and Customs (through no fault of my own!) which I have been paying back through an amended tax code!

Basically what I want to know is, when they call it 'tax credits' is it in any way linked to the actual income tax we pay, or is that just a fancy government name so that people don't think of it as a 'benefit'. The tax credits system is so complicated that no one (not even the staff) seem to know where I stand with all this. Basically, on the one hand I owe them money, but on the other hand they owe me money, and no one seems to be able to tell me how much it is either way....

malcindebt

Tax credits and income tax are not linked in any way, if you owe money on one, it cannot be collected via the other.

You say you have cut your hours and salary, how many hours were you doing, and how many hours will you do now?

Regarding your P45 and paying Emergency tax, don't worry about it, just hand in the P45 as soon as possible, this wil, as long as the payroll department process the P45 correctly, ensure you are back paying the correct amount of tax as soon as possible.

Your tax credits can be backdated for a period of no more than 3 months, so again, as soon as your award is completed, and you know what your salary is likely to be in this tax year, contact them. It is best to try and calculate what your earnings for the whole year will be instead of giving them what you would earn in a 52 week period of your new salary, as the tax credit system cannot distinguish between the 2.

Elaine_Wilson

Thriftylady wrote:

To complicate matters, I will be starting work on an emergency tax code as I probably won't be able to get a P45 from my current employer in time for starting my new job, so its possible I will start paying more tax than would normally be the case.

BUT to complicate it just a little bit more, my current employer made a mistake some years back which resulted in me underpaying my income tax, and I now owe money to Revenue and Customs (through no fault of my own!) which I have been paying back through an amended tax code!

If you haven't got a P45 when you start your new job, you should be asked to sign a P46. If you sign the certificate that says this is you only or main job then emergency code will be used. This will give you your full personal allowance so you will probably not be overpaying tax.

What is your current code number? Is it significantly higher than 503? What extra allowances will you be able to claim in your new job?

From the second paragraph quoted above it looks as though your code number has been reduced to reclaim the underpaid tax. So, the new employer using emergency code will possibly underdeduct tax from you. Be prepared for extra tax to be taken when you are able to produce your P45.

DazzerG

Tax Credits are calculated on gross pay not net, so Tax Codings dont come into it.